Data & Research July 20, 2015

Affluent Millennials Are Aggressive Savers

Saving a median of 24% of their paycheck, they have a bright financial future.
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Nearly three-quarters (72%) of Affluent Millennials—those born between 1981 and 1997 with $100,000 in investable assets, not including real estate—are willing to make financial sacrifices today in order to have a brighter future. This is according to “Winning Affluent Millennials,” a survey LinkedIn conducted among Millennials.

With the sacrifices they are making today, they are gearing up for big goals in the future, with 30% planning to start a business, 27% expecting to buy a second home and 19% intending to start a charitable foundation.

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Affluent Millennials are carrying debt on their credit cards (67%), via personal loans (43%), student loans (43%) and business loans (35%).

Despite this debt, they are aggressive savers, socking away a median 24% of their paychecks. In fact, 66% save more than 25% of their paychecks, and 50% save more than 35% of their paychecks.

They prefer to research investments on their own (47%), and make financial decisions and execute trades on their own (50%). “It appears that Affluent Millennials might approach their own finances with a greater sense of ownership than previous generations,” the report says. “When it comes to managing their finances, it’s clear that Affluent Millennials want more control.”

NEXT: Affluent Millennials’ views toward advisers

Nevertheless, Affluent Millennials value an adviser, with 87% considering financial advisers important. Thirty-seven percent call advisers a “must-have.”

They also foresee a vastly different financial landscape in the future, with 32% foreseeing a completely cashless society, 27% think banks will no longer be the primary financial institution, and 24% expect a sharing-based economy. The vast majority, 69%, are open to financial offerings from non-traditional brands—and many are already making use of alternative payment platforms. Thirty-four percent use Apple Pay, 31% use Goodle Wallet, and 25% use Samsung Pay.

Once they work with a financial institution, 95% say they are very or somewhat loyal toward that organization. Nearly two-thirds, 64%, trust their financial institution.

“This willingness to venture outside traditional financial services brands, combined with the tendency among Affluent Millennials to remain loyal to providers once they become customers, could cause quite a shakeup throughout the finance world,” the report says.

As to what they look for in a financial institution, 90% want them to make use of social networks. Ninety-one percent of Affluent Millennials use social networks to research opinions about financial markets and investment opportunities, and 84% turn to social networks to find financial product reviews by current customers.

LinkedIn and Ipsos surveyed 9,200 Millennials and Gen X’ers in April. The full survey can be uploaded here.

Data & Research July 20, 2015

Sponsors Actively Working to Derisk DBs

Seventy percent of DB plan sponsors are contributing more to their plans than the minimum required amount.
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Plan sponsors feel tremendous pressure from their defined benefit (DB) plans and are looking to reduce their risks, according to the Mercer / CFO Research 2015 Risk Survey, “Taking the Next Step in Pension Risk Management: Planning to Move Ahead.”

In 2013, when Mercer conducted its previous survey, funded status improved to 88% due to rising interest rates and strong equity returns. However, in 2014, it fell to 79%, prompting 70% of DB plan sponsors in 2015 to contribute more than the required minimum amount to their DB plans. In addition, 59% of sponsors have offered some type of one-time lump-sum payment to DB plan participants, and another 49% expect to offer such a payment within the next two years.

More than one-third (36%) of DB plan sponsors expect to purchase an annuity either this year or in 2016. Twenty-two percent said they have closed their defined benefit plans to new hires, 26% have partially frozen their DB plans, and 16% have completely frozen their DB plans. Dynamic derisking is another strategy sponsors are taking, with 42% using this method and 39% considering it.

Given all of these measures, 90% of sponsors are very satisfied with the risk management actions they have taken.

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The reasons sponsors said they are so proactive about lessening their risks include the fact that the Society of Actuaries increased its mortality assumptions; 37% of sponsors said this was a reason why they will be improving their pension funding policies in the next two years. Just over one-quarter (27%) also noted that the Pension Benefit Guaranty Corp. has increased its premiums.

“2014 was a game changer for the pension industry, with factors like new mortality tables and market volatility causing funded status to decline,” says Matt McDaniel, a partner with Mercer Retirement. “CFOs need to be attuned to an evolving pension market and use the best tools and resources available to develop DB strategies that make the most economic and strategic sense for their organizations.”

The findings are based on a survey of 213 senior executives that Mercer and CFO Research conducted in April and May 2015.

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